John Minchillo/AP

Exclusive

Government Shutdown Empties Offices Enforcing Sanctions on Iran

The shutdown has forced the Treasury Department to furlough most of the employees enforcing sanctions on Iran, just as the U.S. is beginning new negotiations. Josh Rogin and Eli Lake report on the potential fallout.

10.03.13 2:00 AM ET

With the government shut down, most U.S. officials enforcing sanctions on Iran are not at work, potentially undermining pressure on Tehran as U.S.-Iran negotiations recommence, according to administration officials, lawmakers, and experts.

The Treasury Department has furloughed approximately 90 percent of the employees in its Office of Terrorist Financing and Intelligence (TFI), which is responsible for the monitoring of illicit activities and enforcement of sanctions related to several countries, including Iran, Syria, and North Korea, Treasury officials told The Daily Beast. The drastic scaling down of personnel working on those activities comes just as the Obama administration is engaging in its first set of diplomatic negotiations with the new Iranian government, led by President Hassan Rouhani.

A subsection of TFI, the Office of Foreign Asset Control (OFAC), which implements the U.S. government’s financial sanctions, has been forced to furlough nearly all its staff due to the lapse in congressional funding, said a Treasury Department spokesman.

“As a result, OFAC is unable to sustain its core functions of: issuing new sanctions designations against those enabling the governments of Iran and Syria as well as terrorist organizations, WMD proliferators, narcotics cartels, and transnational organized crime groups; investigating and penalizing sanctions violations; issuing licenses to authorize humanitarian and other important activities that might otherwise be barred by sanctions; and issuing new sanctions prohibitions and guidance,” the spokesman said. “This massively reduced staffing not only impairs OFAC’s ability to execute its mission, it also undermines TFI’s broader efforts to combat money laundering and illicit finance, protect the integrity of the U.S. financial system, and disrupt the financial underpinnings of our adversaries.”

Two other subsections of TFI, the Office of Intelligence and Analysis (OIA) and the Financial Crimes Enforcement Network (FinCEN), also are working with a skeleton crew. According to FinCEN’s shutdown plan (PDF), 30 of 345 employees were kept on after appropriations ran out Oct. 1.

Administration officials often tout the various rounds of sanctions passed by Congress and signed by President Obama as crucial to pressuring the Iranian regime to strike a deal to bring its clandestine nuclear program into accordance with international standards of transparency and convince the world it is not developing a nuclear weapon.

“Because of the extraordinary sanctions that we have been able to put in place over the last several years, the Iranians are now prepared, it appears, to negotiate,” Obama said Monday after meeting with Israeli Prime Minister Benjamin Netanyahu at the White House. “But we enter into these negotiations very clear-eyed. They will not be easy. And anything that we do will require the highest standards of verification in order for us to provide the sort of sanctions relief that I think they are looking for.”

Pressures must be kept in place and even strengthened as new negotiations with the Iranians begin, Netanyahu responded. But the furloughs are making it more difficult to enforce the sanctions during the budget stalemate.

FinCEN processes tips from banks about suspicious activity and possible money laundering, and shares the data with law enforcement. The network and OFAC are two of the most potent tools the U.S. government has used to pressure Iran.

“Given the fact that the vast majority of FinCEN employees have been furloughed, important pieces of financial intelligence will not be sifted through and analyzed by the agency charged with this task,” said Avi Jorisch, a former policy adviser for the Treasury Department’s TFI office. The government is shut down, Jorisch said, but “money launderers are certainly not taking vacation.”

Mark Dubowitz, executive director of the Foundation for the Defense of Democracies, said Iran could capitalize on the lack of monitoring and sanctions enforcement to replenish its coffers and advance its nuclear program while no one is looking.

“If the lights are not on, then the Iranians will engage in massive sanctions busting to try to replenish their dwindling foreign exchange reserves,” he said. “If you don’t have the resources to investigate, identify, and designate the tens of billions of dollars of Iranian regime assets, then you’ve extended the economic runway of the Iranian regime and increased the likelihood that they could reach nuclear breakout sooner rather than later.”

In Congress, top Democrats blame House Republicans for failing to pass a continuing resolution to keep the government running.

“Today, we learn that the Republican shutdown is hurting the Treasury’s efforts to implement sanctions against Iran to prevent them from developing a nuclear weapon,” Rep. Jerrold Nadler (D-NY) told The Daily Beast. “This insanity has to stop. We must not allow a few extreme members of the Republican Party to threaten our national security any longer. Speaker Boehner should put a clean bill on the floor and allow an up or down vote on reopening the government today. Any further delay clearly threatens our national security.”

Top Republicans involved with Iran sanctions said the administration is to blame for not keeping the Treasury employees at their jobs.

Get The Beast In Your Inbox!

Daily DigestStart and finish your day with the top stories from The Daily Beast.

Cheat SheetA speedy, smart summary of all the news you need to know (and nothing you don't).

You are now subscribed to the Daily Digest and Cheat Sheet. We will not share your email with anyone for any reason

“Enforcing sanctions and stopping illicit financial transactions are core national security missions,” Sen. Mark Kirk (R-IL) told The Daily Beast. “The administration should not be putting our national security at risk to score political points. All sides need to find common ground and do what’s right for the American people.”

Treasury officials say they are implementing the shutdown guidelines given to them by the Office of Management and Budget and doing the best they can with limited resources.

“The House Republicans’ decision to shut down the government has real consequences, and it goes to our ability to execute our mission, which is integral to protecting our country and advancing our interests,” a Treasury Department official said. “We are still enforcing our sanctions, we are still capable of taking action if necessary, but it’s a hell of a lot harder and we can’t be nearly as nimble and comprehensive as we could be if Congress would pass a clean CR.”

State Department officials told The Daily Beast on Wednesday that the shutdown won’t affect those plans.

“Dealing with Iran’s nuclear program is an absolute top priority for the State Department, and Undersecretary Wendy Sherman and the State Department team are working hard every day on this issue preparing for the next round of talks in Geneva with Iran and our international partners,” said Marie Harf, deputy State Department spokeswoman.